China’s central bank: Beijing must slash $2 trillion in U.S. dollar reserves

Following the April 18 announcement by the People’s Bank of China governor that Beijing urgently needs to diversify its stockpile of U.S. dollar reserves, a clue emerged on Saturday as to how colossal China’s move away from the dollar may be.

Xinhua reported April 23:

China should reduce its excessive foreign exchange reserves and further diversify its holdings, Tang Shuangning, chairman of China Everbright Group, said on Saturday.The amount of foreign exchange reserves should be restricted to between 800 billion to 1.3 trillion U.S. dollars, Tang told a forum in Beijing, saying that the current reserve amount is too high.

China’s current amount of U.S. reserves is around 3.04 trillion dollars. For Beijing to hack down to the amount Tang suggests, it would have to cut around 2 trillion dollars of U.S. holding.

And Tang is not alone in calling for this astronomic reduction in China’s holdings of U.S. reserves. Tang, a representative of China’s private sector, was only echoing a statement from the country’s public sector: “… Xia Bin, a member of the monetary policy committee of the central bank, said on Tuesday that 1 trillion U.S. dollars would be sufficient. He added that China should invest its foreign exchange reserves more strategically …” (ibid., emphasis mine).

It seems beyond coincidence that these leading Chinese voices are calling to slash the nation’s greenback reserves by approximately the same amount of dollars that the Fed recently printed.

On April 8, Trumpet editor in chief Gerald Flurry wrote about the astronomical sums the U.S. owes to China and Japan: “[T]hose two nations are going to be cozying up to each other more and more as time goes on. If these two countries demanded payment on those loans, we could see the dollar collapse overnight! That is how deadly dangerous all this is” (co-worker letter).

If Beijing takes the drastic action that Tang, Xai and others are calling for, it will deal a blow to the dollar of seismic proportions, and, as Mr. Flurry said, it could lead to the greenback’s collapse.